A new World Bank report says hundreds of billions of dollars of subsidies to energy producers need to be used instead to “ensure a green and just transition.”
World Bank Group headquarters in Washington, D.C. (Franz Mahr / World Bank, CC BY-NC-ND 2.0)
By Kenny Stancil
Common Dreams
The World Bank last week reached a conclusion that environmentalists have been hammering for decades: governments must use the trillions of dollars they spend annually to prop up fossil fuels, industrial agriculture and commercial fisheries on the climate crisis instead.
“People say that there isn’t money for climate but there is — it’s just in the wrong places,” Axel van Trotsenburg, senior managing director of the World Bank, said in a statement. “If we could repurpose the trillions of dollars being spent on wasteful subsidies and put these to better, greener uses, we could together address many of the planet’s most pressing challenges.”
According to the bank’s newly published report, “Detox Development: Repurposing Environmentally Harmful Subsidies,” governments around the world collectively spend at least $7.25 trillion each year — roughly 8 percent of global gross domestic product — to sustain the socially and ecologically damaging fossil fuel industry along with often destructive forms of farming and fishing.
[Related: Development Banks Fund Factory Farming in Ecuador]
Notably, the world needs to invest trillions of dollars each year in climate change mitigation, adaptation, and compensation, from ramping up clean energy production to strengthening the capacity of communities to withstand and recover from extreme weather. As van Trotsenburg suggested in a blog post, vast sums of public money to do just that are “hiding in plain sight.”
Axel van Trotsenburg, senior managing director with the World Bank at the World Economic Forum in January 2023. (World Economic Forum, Flickr, CC BY-NC-ND 2.0)
Some of the annual support for fossil fuels, farming, and fishing comes in the form of more than $1.25 trillion in explicit subsidies, or direct government expenditures.
The report notes that governments provided $577 billion in 2021 to “artificially lower the price” of planet-heating coal, oil and gas. That’s nearly six times as much as the $100 billion of financing wealthy countries pledged to mobilize annually for climate action in impoverished nations starting in 2020 — a promise that has yet to be delivered.
“By underpricing fossil fuels, governments not only incentivize overuse, but also perpetuate inefficient polluting technologies and entrench inequality,” states the report. “Of all subsidies to the energy sector, about three-quarters go to fossil fuels.”
[Related: The Madness of Fossil Fuel Subsidies]
Explicit subsidies for agriculture are estimated to exceed $635 billion per year. Over 60 percent of this amount “is in the form of coupled support, which distorts producers’ decisions and leads to harmful environmental and economic impacts,” the report laments.
[Related: Big Agriculture Squeezing Argentina]
Explicit subsidies for fisheries are estimated to exceed $35 billion per year. According to the report, $22 billion of this constitutes “harmful subsidies that can lead to overcapacity and overfishing —often in international waters or the exclusive economic zones (EEZs) of low-income coastal countries.”
The problem is much larger than explicit subsidies, however. The report estimates that implicit subsidies for fossil fuels, farming, and fishing range from $6 trillion to $10.8 trillion per year. These are the indirect costs attributable to the three heavily subsidized sectors and the havoc they wreak on the health of the world’s air, land, and oceans and by extension, its people.
People’s Plenary, COP27, Sharm el-Sheikh, Egypt, Nov. 17. (UNclimatechange, Flickr)
Implicit subsidies for fossil fuels amounted to an estimated $5.4 trillion in 2020. This includes “impacts from local air pollution, greenhouse gas emissions, road congestion, and forgone tax revenues,” notes the report.
Estimates of the annual value of implicit subsidies for agriculture vary. At the low end, the report says they could amount to anywhere from $548 billion to $1.1 trillion in damage caused by greenhouse gas emissions. Citing a study that takes into account the costs of greenhouse gas emissions (which those researchers put at $1.5 trillion), land degradation and biodiversity loss ($1.7 trillion), and pollution, pesticides, and antimicrobial resistance ($2.1 trillion), the report finds they could be as high as $5.3 trillion.
As the report says:
“Subsidies incentivize excessive fertilizer usage to the extent that it suppresses agricultural productivity, degrades soils and waterways, and damages people’s health. More than half of global agricultural production now occurs in regions where fertilizer is suppressing rather than increasing productivity. This means there is significant room to reduce fertilizer use with positive impacts on crop production. Yet the opposite is achieved by subsidies, as excessive fertilizer application is not absorbed by crops and runs off into waterways. Inefficient subsidy usage is responsible for up to 17% of all nitrogen pollution in water in the past 30 years, which has large enough health impacts to reduce labor productivity by up to 3.5%.
Agricultural subsidies are responsible for the loss of 2.2 million hectares of forest per year, equivalent to 14% of global deforestation. Agricultural subsidies in rich countries are driving significant tropical deforestation around the world. For instance, livestock subsidies in the United States drive deforestation in Brazil by increasing the demand for soybeans as feedstock. In turn, subsidy-driven deforestation causes the spread of vector-transmitted diseases—including 3.8 million additional cases of malaria each year, with an economic impact of up to $19 billion per year.”
“For fisheries, the largest implicit subsidy is the lack of regulations to prevent overfishing,” states the report. “Estimates suggest that the lack of regulations results in lost economic benefits of $83 billion per year.”
Attendees at a World Bank session in April on “investing in human capital to accelerate the green transition.” (World Bank / Taylor Mickal, CC BY-NC-ND 2.0)
As van Trotsenburg pointed out in his blog post: “It’s not just about the money. Ending these colossal subsidies would also be good for people and the planet.”
“The burning of oil, gas, and coal causes 7 million premature deaths each year around the world through the toxic air that people breathe — a striking figure when you consider that it is roughly the same as the number of people who have died from Covid-19,” he wrote, citing the World Health Organization’s 6.9 million tally. “That burden falls mostly on the poor. Repurposing subsidies literally saves lives.”
[Related: COP27: Show Marginalized Countries the Money]
Richard Damania, chief economist of the Sustainable Development Practice Group at the World Bank, said that “with foresight and planning, repurposing subsidies can provide more resources to give people a better quality of life and to ensure a better future for our planet.”
“Much is already known about best practices for subsidy reform,” Damania added, “but implementing these practices is no easy feat due to entrenched interests, challenging political dynamics, and other barriers.”
With the window for climate action rapidly closing amid a mounting debt crisis in the Global South, the World Bank stressed that “repurposing… wasteful subsidies will help ensure a green and just transition that can provide jobs and opportunities for all.”
For subsidy reform to be successful, “governments must compensate the most vulnerable groups through social assistance programs, like cash transfers,” the bank said. In addition, policymakers should:
- Build public acceptance through transparent communication;
- Give people and businesses time to adjust; and
- Show how freed-up revenue is being reinvested to support longer-term development.
“The world’s sustainable development goals are directly undermined by the roughly $1.25 trillion in explicit subsidies paid every year to fossil fuel, agriculture, and fishery sectors,” the World Bank observed.
“This report documents the hidden consequences of subsidies. It shows that subsidy reform can remove distorted incentives that obstruct sustainability goals, but it also can unlock significant domestic financing to facilitate and accelerate sustainable development efforts that would have greater, wider, and more equitable benefits.”
Kenny Stancil is a staff writer for Common Dreams.
This article is from Common Dreams.
Views expressed in this article and may or may not reflect those of Consortium News.
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Thanks for the plug for SMRs. Hard to understand why do many still consider nuclear power a dirty word especially when the next generation of reactors will be much safer less complicated and expensive and produce far less waste.
I’m with you for several good reasons. These new reactors represent a “payoff” for the efforts in the field that have gotten us to this point. The problem comes when good ideas are hijacked or misused.
Maybe the best reason is they could provide more time for us all on this planet.
Time to rid ourselves of nuclear weapons and sponsor these devices in a state ran program.
Now if we could find a way to deal with the tons of spent fuel we have accrued by chasing “Free Electricity”.
In Illinois rate payers are continually hammered for the cost of a terribly expensive nuclear power grid that has never really made any money to lighten the load of home owning rate payers. While the commercial consumers get breaks on their power bills. And still they want more money!
Unfortunately the greed heads have ran nuclear power ideas into the ground by charging private citizens for the luxury power companies enjoy by running these money eating power plants.
Thanks CN
Pretty difficult to take what Mr. van Trotsenburg says at face value. We often forget that before the Bretton Woods meeting another took place earlier and not everyone got invited to that one.
I have to wonder why.
The purpose is listed as being economic development and poverty elimination. Again I have to wonder what happened.
The UN catches hell and is subjected to plenty of grief because of the dirty politics some of the worlds leading nations engage in. I don’t think listing them is necessary if everyone pays as much attention to the goings on there as is claimed.
The Deep State, in my opinion feeds off too many efforts the Bank engages in. The buys and selling of influence seems to be the major goal all too often. World class bankers and the other super wealthy parasites who peddle influence in the pursuit of economic development efforts around the world and we can see the resulting chaos.
The U.S. has a long history of bad deeds engaged in by the U.S. State Department and the nations intelligence apparatus. Sanctions being one of the cruelest used against nations who often are judged extremely harshly by the U.S. military and intelligence communities.
If Mr. Trotsenburg has stepped out of line by his statements addressing the World Banks Issues I suspect we will learn in the near future. Here is to the hope he can effect change and not fall from a window high above the ground.
Thanks CN
Color me suspicious.
I have nothing against subsidies for authentic green projects, but years and decades have seen an overwhelming tide towards usurpation and derangement, often led by these same institutions and garlanded with stolen buzzwords and false promise. Consider the “Green Revolution,” the GMO’s, Cap and Trade, the various “trade agreements,” the infamous “rules-based” “order,” and now even the various sorts of vaunted “equalities” that turn out, against all reason, to be reasons to enforce class lines and sharpen censorship.
These guys choke change off, they push it down, they shunt it aside, and when it can no longer be throttled, they try to let it up in such a way that allows them to ride it and deflect it, so that their rule and the deep structures that keep churning out problems remain intact. These guys are bent enough to call nuclear energy “green.” If you can take money and direct your energies to regeneration, wonderful. But watch out.
It seems that they have failed to encircle Russia, though the effort is still live. They ought to know they are failing, and they are not all idiots, not by a long shot. There is no real chance of encircling China. The old saw about land wars in Asia still holds, or should, and China has what it needs for viability internally: when it recedes, it may push back.
The old petrodollar accord is falling apart. Various large economies across the world are filling in where American energies have left, drifting off to war and waste and pharmaceuticals and stupid currency tricks. The rulers likely see that they cannot hold the line that they have attempted. Maybe that does create some space in which to negotiate some gain. But it will also continue to cause some vicious thrashing as powers shift.
But don’t think that because they have fallen back that they have become friendly.
There should be NO subsidies for any so-called energy development. Why is Maine (and many other places) being disfigured with “solar farms”? Because of subsidies, without which none of these investors would invest a dime.
Please read Bright Green Lies, an excellent book exploring the further industrialization of our landscape. I do not support any climate change-mitigating activities which are not aligned with the natural world. That said, people need to understand that nothing replaces fossil fuels. They are very powerful and they have created the world we now think is normal. The transformation of human understanding seems nearly impossible: How many readers are willing to give up the luxury we live in?
Meanwhile, the evil ones who rule us want 15-minute cities — the things that are being done in Scotland are truly draconian — while they fly hither and yon, climb into tubs for a tourist trip to the Titanic, jump into rockets for a trip into space, and prosecute endless wars, using far more fuel than ordinary people use in years if not decades.
“How many readers are willing to give up the luxury we live in?”
Good question Susan. And it depends on how we define “luxury”. I guess, compared to some, living in parts of Africa, having running water in my dwelling is a luxury. (And who knows how long that will last, as the drought here has reduced our local lake to only 9.7% capacity)
It’s all comparative i suppose, but the inequality of the lifestyle of the west compared to developing countries is enormous. All the more saddening because capitalism, greed and exploitation has thus determined. Not to mention the reduction of “Aid” programmes to some countries in desperate need.
It’s hard to imagine that the WB “getting it” will bring any qualitative change. These are, after all, the same people who have gotten everything absolutely wrong for decades.
From creating poverty to creating wars and refugees, these international organisms have waged relentless war against humanity while pretending to the contrary and camouflaging their intents behind the writings and pronouncements of well-paid bureaucrats and aspiring true believers along with their government counterparts. Though if one ignores stated policy objectives and assume they meant the exact opposite, then they have always gotten it and just not exactly as was stated.
Or is it a camouflage for redirecting money to some other nefarious undertaking using of “getting it” to red pill us?
Not in these times when people with higher education degrees and established credentials in prestigious organizations spurn research and peer reviewed science in the name of “fighting misinformation” while inflicting the barely credible results of their paid-for research on populations and unleashing witch hunts by their own degreed thugs.
One would be wise to listen and watch like a hawk while those who speak like sheep but have teeth of wolves make speeches.
Why? Why? is it that before anything changes for the positive humanity must stand at the very edge of the precipice??? Haven’t these killer capitalists understood yet…no amount of money will do any good if you can’t breathe the air, drink the water or eat the food. How stupid is stupid? How selfish is selfish?
This is weak on details of proposals. Where do we see evidence of the years of expertise invested in this topic shown in any kind of coherent set of policies to move away from fossil fuels? Also this report separates fossil fuels from industrial ag and commercial fishing, both of which are reliant on fossil fuels and can’t be realistically separated. Where is anything remotely resembling realism about how much will have to change to avoid global chaos as more and more of the earth becomes unlivable from the greenhouse effect. Isn’t it quite likely that the world bank is presenting this pathetic nonsense as a cover story and a scam? What is the world bank’s role in fostering a global fossil fuel based system and deep dependence on the fossil fuel driven empires that continue to increase fossil fuel use?
Some changes are obviously needed where subsidies are being misused, but let’s not throw baby out with the bathwater.
Fossil fuels are the most efficient and economically viable fuels for transport and power generation. Renewables are not clean, cause untold harm in terms of mining and labour practices, and are economically a disaster. Without subsidies, renewables would disappear as they are dirty, inefficient and unaffordable.
Small Modular Reactors (SMRs) are the only viable alternative to current fossil fuel generators – that’s where money needs to go.
How much damage will be inflicted on Joe Public before common sense prevails ?
The World Bank has “gotten it” for a while now, but what will they do about it? What CAN they do about it? Seems the forces aligned for not allowing any significant change to transpire are too powerful, and they will kill us all before they willingly step aside and allow the majority of the world to more intelligently manage their societies.
What the World Bank says for public consumption is just that: for public consumption. What it actually does is very different and has never changed. It is one of the empire’s most valued enforcers.
Agreed. The folks at Common Dreams seem to mean well, but can be naive at times. What is being presented here is merely multiple choice (A) and multiple choice (B)
(A) Fossil fuels, coal and gas
(B) Solar, Wind energy
The Spartans vs. Athenians–Democrats vs. Republicans–capitalism vs. communism–our team vs. their team
The presentation of dualism is very a subtle manipulation in psychology.
The elites at the world bank know exactly what they are doing.
Consider this: Maybe…just maybe there are multiple choices (C) and (D), and more.
Human kind has had zero point energy and anti-grav technology for decades. We-the-people of the planet are denied access to them.
The funding for climate science is also highly politicized. Now the Irish government is telling the ranchers there they must eliminate 65,000 cows per year because they fart too much.
I asked my Scottish Highland cow what she thought about that, and she replied that human farts are far more foul. They are petitioning to get rid of us!